Inflation projected below 2.5% for year

The Commerce Ministry is standing by its forecast that the inflation rate will be between 2.2% and 2.5% by the end of this year, despite increasing pressure from the rise in crude oil prices.

Suchai Jaovisidha, director of the Internal Trade Department, said the rise in oil prices was unlikely to push local manufacturers to increase the price of their products in the short term.

"The Thai economy is now at the first stage of recovery. Manufacturers will probably absorb increased production costs led by a rise in oil prices," he said, adding that the rise in oil prices was likely to be temporary.

World oil prices were unlikely to increase sharply, but if they did continue to rise, Mr Suchai said he expected the United States to react against oil producing countries in order to protect the US economy.

However, if the crude oil price remained at over $25 a barrel over a long time, the economic impact would become much more serious than expected.

According to an internal trade department study, every 1% increase in the retail oil price will affect the Consumer Price Index by 0.03%. The CPI in January rose by 0.5% from the same month last year and by 0.2% from December.

The year-on-year index in the food sector in January declined by 2%. The prices of fresh food declined sharply by 7.6%, followed by fresh vegetables and fruit with a fall of 6.8%.

Prices in the non-food sector rose by 2%, led by transport and telecommunications, up 6.7%, followed by the tobacco and alcohol group of products, up 2.5%.

Author: Woranuj Maneerungsee